MW Why Intel is teaming with Elon Musk on an ambitious chipmaking venture
By William Gavin
Intel will bring its design and packaging experience to the expensive Terafab project jointly led by Tesla and SpaceX
Elon Musk wants his Terafab to make logic and memory chips - and to package them.
Intel is the first major chip maker to lend Elon Musk a helping hand in his bid to launch a potentially multitrillion-dollar semiconductor manufacturing project.
Musk announced plans in March to develop the Terafab, a massive manufacturing project jointly led by Tesla $(TSLA)$ and SpaceX. Together, the companies said, they would aim to manufacture 1 terawatt of computing capacity a year, or twice as much as needed by the entire U.S.
While some experts praised Musk's ambition, others noted that Tesla and SpaceX lack experience with chip manufacturing. That's where Intel $(INTC)$ comes in.
"Our ability to design, fabricate, and package ultra-high-performance chips at scale will help accelerate Terafab's aim to produce 1 TW/year of compute to power future advances in AI and robotics," Intel said in a statement on Tuesday.
In a separate statement, Intel CEO Lip-Bu Tan praised Musk's "proven track record of reimagining entire industry," which he said is what the semiconductor-manufacturing industry needs. A representative did not immediately return a request for comment clarifying how Intel will support the Terafab project.
Intel's stock rose more than 2% in morning trading on Tuesday, while Tesla shares were down nearly 4%. Intel shares are up 41% year-to-date as the company attempts to reclaim its leadership in chip manufacturing.
Musk first publicly floated a deal with Intel last November, as he lamented that Tesla's current partners wouldn't be able to make enough chips for his ambitions. Tesla already works with Samsung Electronics (KR:005930), Taiwan Semiconductor Manufacturing (TW:2330) and Micron Technology $(MU)$.
See: Tesla's stock could fall another 60%, JPMorgan analyst warns. Here's what's behind his 'high degree of caution.'
TSMC and Samsung have been tasked with mass-producing Tesla's next-generation AI5 chips next year at facilities in Arizona and Texas. Neither company was "comfortable" expanding at a rate that Musk wants, he said last month. In November, Musk said SpaceX and Tesla will need as many as 200 billion AI chips annually.
The Terafab will be capable of making memory chips, logic chips and packaging, according to Musk. That sort of facility "doesn't exist anywhere in the world," he added. The chips will be used for Tesla's humanoid robots, cars and data centers, as well as for SpaceX's satellites.
"We either build the Terafab or we don't have the chips, and we need the chips, so we're going to build the Terafab," Musk said last month.
A terawatt of annual capacity would require "many multiples" of the current installed manufacturing capacity of relevant semiconductors, such as memory chips, according to Bernstein analysts. They said their "very rough" estimate calls for between $5 trillion and $13 trillion in capital expenditures to achieve Musk's plan.
See: There's a new ETF for memory stocks. History suggests that might be an ominous sign.
It's unclear how costs will be divided among Tesla and its partners. Tesla said earlier this year it has booked $20 billion in capex for 2026, excluding costs associated with the Terafab.
SpaceX, meanwhile, is gearing up for a public listing as soon as June. The rocket-launch firm is reportedly trying to raise as much as $75 billion at a valuation of $1.75 trillion. It acquired Musk's AI startup xAI in February, which boosted its private-market valuation to $1.25 trillion.
Read: These little-known chip stocks could be winners as SpaceX and Amazon make big satellite pushes
-William Gavin
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 07, 2026 11:18 ET (15:18 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.